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Quest Means Business

Haiti Experiences Second Earthquake

Aired January 20, 2010 - 14:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

RICHARD QUEST, CNN INTERNATIONAL HOST: Profits fall short. The DOW falls further. Are the banks bouncing back? The Q-25 is coming up. And power to the people. Billy Bragg won't pay his taxes because of bonuses.

I'm Richard Quest. Good evening. I mean business.

Good evening. The earnings season is in full swing in United States. And today some of America's biggest banks told us how they've been getting on tonight on Quest Means Business. Who missed the targets? Who's just scraping by, and who is on the road to recovery? We are going to start with our unique look at the corporate earnings season. It is of course our time for the Q-25. If you know the show, you know this is our unofficial barometer of the health of corporate America.

We've chosen 25 of the largest companies with a wide range of sectors. As the results come out, we award either green balloons or red balloons for an overall solid showing.

Basically remember how it goes. Reds goes for those if you've missed, greens if you've done reasonably well. However, of course the devil is in the detail. Come back to these in just a moment. Join me over here as we look at the results that we've got today. Lets begin in the air with AMR, the company that owns American Airlines.

It saw its losses narrow slightly to $344 million. But there's plenty of turbulence out there. AMR has some issues particularly of course we'll talk about in a moment. This one came from yesterday. This is IBM which saw quarterly false (ph) profit up to $4.8 billion. But is this number as good as it seems? Is there something lurking underneath that 4.8 that means it gets red instead of green?

To the banks. This was the talking point -- Morgan Stanley -- second straight quarterly profit $413 billion -- sorry $413 million. I've got a Freudian slip there if -- if ever there was one. Morgan Stanley actually grew quite considerably over the course of the year by taking over Smith Barney.

Move to another bank though and you see a completely different story. Bank of America -- a loss of $5.2 billion very much due to the repayment of the TARP funds. The same factors going on here that we saw, of course, with CitiGroup (ph) just a -- a day or so ago. That's Bank of America.

And finally Wells Fargo which swung into profit -- $2.8 billion for the banking sector. Wells Fargo, West Coast based, did better. But remember both Wells Fargo and Bank of America are still bedeviled by high consumer losses, especially in their credit card and bank loan divisions. You're up to date with how they performed. Lets bring in Maggie Lake in New York.

Maggie -- and Susan Masovich (ph) at the New York Stock Exchange. Ladies, I've -- I've got me hands full here with balloons. I'm going to start off with American Airlines -- AMR -- because I think AMR not only had -- it's fares were down. Not only had problems, its got problems with British Airways and Iberia. Its also got problems with Jal (ph) in Tokeo.

So I'm -- I'm overruling you both if you don't disagree. I think American Airlines gets a red. Anyone want to disagree?

LAKE: No, definitely red.

QUEST: No, says -- no. There we are. OK. Well lets go to IBM. IBM which of course has an interesting result -- made money. But its consulting business -- Maggie, turn to start with you -- what you would give IBM.

LAKE: Yes, Richard, I know you're worried about the consulting business. But I think you have to give it a green. They -- you know, they did well. They made money. They're cutting costs. They are growing other parts of their business. It's a tough environment, but I think they executed and they get a green.

QUEST: I -- I -- I fought you on this. And Susan, you're -- you're nodding your head.

MASOVICH: Yes, I agree with Maggie wholeheartedly.

QUEST: But how can you agree with them? Their consulting business actually didn't do as well. They're worried about the future.

MASOVICH: Well, I mean, I think it's OK to be worried about the future. I mean no one said that, you know, recovery was going to be smooth. The fact is the company is still making money. That's not its only source of revenue. And you know, it is a challenging time. I mean let's not put our heads in the sand, Richard.

QUEST: All right. I've -- I've been -- two against one. I can't -- well I'm not going to fight this one. The -- IBM gets a -- a green.

Morgan Stanley -- and the consensus seems to be a red. Did you -- Susan Masovich -- Morgan Stanley -- what was it about Morgan Stanley that the market really didn't like today?

MASOVICH: Fell short of estimates. You know -- I mean the simple truth is that, Richard, the bar has been set higher now, and we are along ways off from where we were a year ago. You need to see some improvement here -- some -- some dramatic improvement. And Morgan Stanley fell short.

QUEST: Maggie?

MASOVICH: It's as simple as that.

LAKE: Yes, Richard, I think another thing investors or shareholders may be not happy with is the fact that even though they missed estimates, compensation rose really strongly. They're one in the group that are giving out money -- giving out bonuses to their staff. Hard to do that when you're missing some estimates. So some shareholders may be uneasy with that as well.

QUEST: Their compensation numbers, Susan, are pretty horrific bearing in mind the current state of the play (ph). The amount they're planning (ph). As I saw it, they're planning to divvy out almost record amounts.

MASOVICH: I mean that's a head shaker. I mean I -- I -- I think that basically the whole world can't understand the disconnect and -- and -- and how sensitive an issue that is. I mean having said that, you know, you have somebody like John Mack who says he was -- (inaudible) stems from the top down (ph) -- he said he wasn't going to take anything. And of course he is no longer with the company. But, yes. It's a very sensitive issue, and it's a real disconnect at this particular stage in the recovery.

QUEST: Hey listen. I don't know whether it's synergy, but the balloon is red, Susan Masovich's top is red, Maggie Lake's Jacket is red. And I mean there's a bit of -- a bit of coordination going here (ph).

MASOVICH: Sending subliminal messages here.

QUEST: (Inaudible). All right. Two more very quick -- two more very quickly. Bank of America -- I mean only a fool thinks it's not a red. Are either of you a fool today.

LAKE: No, that -- that's got to be a red. And yes they had to pay back the government. But -- but some other people -- competitors did too, and they didn't have the same problem. So Bank of America is struggling.

QUEST: Susan?

MASOVICH: Yes, and I mean they're setting aside what -- $11 billion for future loan losses. It's not exactly a confidence builder, Richard.

QUEST: So finally to Wells Fargo. Wells out on the west. All right, Maggie, you kick us off with Wells Fargo.

LAKE: This is an example of -- of someone who executed -- a company that executed better. They actually swung to a surprise profit. Not a lot of people expected that. Almost no one. And they also got hit by that big pay back of TARP. But they're seeing some benefit from mortgage banking. Granted the government is giving out free money so they should be able to do well. But as we can see, some others didn't. So I think you have to give Wells Fargo green.

QUEST: Are you with that? Green as well?

MASOVICH: I am. I am, Richard.

QUEST: Oh. Oh. You give too. All right. We'll give you a green. Maggie Lake -- we'll say thank you to Maggie Lake at -- for today's analysis. We need to talk about the markets, and how the markets have been performing. So Susan Masovich, back to you at the stock exchange for an overview on how the markets are trading.

MASOVICH: Well you'd noted correctly that I am wearing red, and that seems to be the color of the day, Richard. You know we sort of eased into the new year. We had a remarkable rally last year. Of course we're still well off (ph) the all time highs. No question about it. But you know we had a nice, easy start to the year. Well now we're starting to get some information. And now you're starting to see volatility.

Sell off -- big triple digit sell off on (inaudible). Disappointed with JP Morgan. Big rally on Tuesday where, you know, there was a sense the market was sniffing an upset win (ph) in Massachusetts. The market -- the market...

(CROSSTALK)

MASOVICH: ... a hunch was correct. And today you know we have a few things. I mean the -- yes, the fragility of the banking section with all these loan losses -- things -- loan reserves that should be set aside. On the housing market, obviously still -- still not stabilized.

And then China. You know China (inaudible) in our banking (ph). I mean, you know, these are -- these are queues that are...

(CROSSTALK)

QUEST: (Inaudible) Susan. Susan. Susan. Susan. You throw -- you're throwing the kitchen sink at us. Well, Susan Masovich at the New York Stock...

(CROSSTALK)

MASOVICH: And that's why -- and that's why you see the volatility, Richard. It really is. I mean it's just a lot coming at us these days. This is the worst follow up (ph) we've seen since last fall.

QUEST: All right. Susan Masovich, many thanks indeed at the New York Stock Exchange. OK. Just have a quick look. These are the balloons that we have at the moment for you. We've added I think three and a one, if the numbers are correct. So if we take a look overall, five and five at the moment is the way it looks for greens and reds.

Here are some of the companies we'll be looking at on Thursday. It will be from Goldman Sachs to Starbucks and all points in between. Ebay, Continental, UHG, Southwest and Xerox. In Europe markets dropped sharply after the signs that the Chinese government -- that's what Susan was talking about -- is applying the break to the economy.

Mines and resources led to declines. XETRA down more than 6 percent. Rio Tinto (ph) down 4 percent. Car makers also fell -- Renault lost 2.5 percent. UBS (ph) downgraded the stock. (Inaudible) balloon (ph) the number of people out of work in Britain fell faster than any month in two and half years. It was overshadowed by concerns of China.

And so Cadbury is now of course going to be part of Kraft. I -- I forget that. Split after a surprising intervention in the takeover agreed on Tuesday. Warren Buffett, the biggest shareholder in Kraft -- that he thinks the buy out is a bad deal. He believes it's paying too much -- giving away too much of its stock to get the deal done. The only problem is Mr. Buffett can't prevent it. Shareholders in Kraft don't have the vote on the deal.

Oh, we came out of the gate at a fast lick. Now the news headlines, and Becky is with us with the news from Haiti at the CNN news desk.

(NEWSBREAK)

QUEST: Many thanks. When we come back in just a moment Billy Bragg, a singer, is talking to the tax (inaudible). We'll hear from the singer and activist about his latest campaign. And this time he does want to change the world.

(COMMERCIAL BREAK)

QUEST: Now Billy Brag is an English singer, song writer, and political activist. And he has taken a stand on bankers' bonuses. It's the sort of stand that many of you have written to me about. You're fundamentally saying that you don't believe you should pay your taxes as long as bankers are receiving large bonuses.

Well this man agrees with you. He's Billy Bragg. He's an English singer. He had a hit album when I think I was at school. It was called "Talking with the Taxman About Poetry."

Well now Mr. Bragg has decided to do a bit more than talk.

(SINGING)

QUEST: So that's Billy Bragg singing. He's written to -- his fundamental problem is about RBS -- the Royal Bank of Scotland. He says the RBS is planning to pay out $2.4 billion in bonuses. Now the argument is RBS is now wholly owned pretty much -- 84 percent -- by the U.K. government. He says it's unfair of RBS to be paying large bonuses whilst that remains the case.

So here is the letter that he has sent to the British Chancellor, Alistair Darling. He says, "I could not help be (ph) struck. You are our representative. Before I prepare to pay my taxes I demand that you exercise shareholders veto, and limit bonuses that pays to employees no more than ?25,000." Bragg has also taken his Facebook page, and got a campaign called "No Bonus for RBS." Sixteen thousand follows so far, and its been going two days.

Bragg wants people to take photos of themselves basically saying, "No bonus for RBS." The -- the fundamental point is Bill Bragg says as a concerned shareholder the RBS staff are the highest paid public servants. So here's the letter. What did Billy Bragg have to say when I asked him. At the end of the day, we've all got to pay our taxes?

(PLAYING VIDEO CLIP)

HESTER: If you asked my mother and father about my pay, they would say it's too high as well. So even when so (inaudible) close to me have that view of bankers. Clearly it's very hard for me to talk about my own pay. All I can say to you is that when I was asked to do this job -- I didn't apply for it when I was asked to do it. And the only conversation I ever had about my pay -- and to this day this is true -- is I was asked what it would take to attract me to leave my previous job."

(END CLIP)

BRAGG: Most definitely I am going to get prosecuted. It's two things you can't avoid -- death and taxes. So taxes will get collected. But I will succeed if I can bring to bear some pressure on the Chancellor to use the veto that he has as part of the RBS deal to limit their above six to ?25,000. That's what I'm trying to do. I really don't want to get in trouble with the tax man. But I -- I feel this is the only weapon I have to hand to use against Alistair Darling. He's in the middle between me and RBS. And he has that power of veto.

QUEST: Even though the British people do own the majority of RBS, isn't it really up to RBS management to decide what they need to pay to remain competitive in financial services?

BRAGG: Well I don't think it is. I think that if our 84 percent that we own is a real share holding, then it's up to the shareholders. Doesn't -- you know, other companies have to have their bonuses approved by shareholders. Why not RBS?

QUEST: Yes, but the problem here is you want a low level of bonus. And RBS might reasonably say, "Actually we do need to pay larger bonuses to maintain and to keep the staff." Particularly if I note for example of what Deutsche (ph) Bank, of what Goldman Sachs, and the other big investment banks will be paying.

BRAGG: Yes, well I don't own any shares in Deutsche (ph) Bank or the other big investment companies. But I do in RBS. And what's going to happen if we don't pay those bonuses do you think?

QUEST: Well if you don't there -- there is the -- the risk as you'll be aware that they will not be able to attract and keep the best talent. Which of course ultimately the argument goes, Mr. Bragg, the British taxpayer will lose out if the company does even worse.

BRAGG: Well you see that sounds like a threat to me. That sounds like a threat to say, "You've given us billions and billions of taxpayers' money at a time when we are facing dire public service cuts. And now we want more money or we're leaving the country." You know I find that's -- that's a threat I don't really accept. I want the Chancellor to call the bluff of the RBS bankers. It's about time somebody did. So that's why I - - I -- I've started this campaign.

The idea of these people leaving the country -- so disloyal to the country that saved them, and their jobs, and their mortgages, and their -- and their -- their nice -- their nice lifestyles. How could they reward us by leaving the country. You know you can say what you like about politicians, and people say bad things about them. But if you push your politician, he doesn't say, "Do as I say, or I'm leaving the country." I'm no longer prepared to be held to ransom by these people. I think we should call their bluff.

QUEST: And you are of course aware that we can't necessarily pick and choose the taxes we choose to pay and when we pay them. That's a road to anarchy. So to that extent your --your measure is -- is an element of political grand standing.

BRAGG: No, it's not really. I mean I'm -- I'm -- I mean I'm a happy taxpayer. I believe in the things that our taxes go for. I believe in the -- the welfare state, and teachers getting paid, nurses getting paid, our soldiers in Helmand Province getting -- getting paid. But I am a shareholder in RBS. And under the rules of the capitalist system, that means I have a say in what RBS does. Now either I am a shareholder with every other taxpayer, or this is a complete sham. And these people are filling their boots with our money, and swanning (ph) off.

QUEST: Are you...

BRAGG: I want to find that out.

QUEST: Are you at all mollified by the Treasury's response today that of course it says it will make absolutely certain that there are no egress -- excessive bonuses being paid?

BRAGG: Well (inaudible) that certain (ph). You know will they introduce something as President Obama will in the United States of America where they say, "No bonuses can be paid until we got our money back from the banks." I'd be very happy with that. I'd be quite happy with that.

Or -- or perhaps the -- the chancellor would like to split up RBS into high street (ph) banks where we can put our money in and be sure it's safe. And then investment could sing along (ph) where the people are taking these high risks. If they make a mistake and lose a lot of money it's their houses that get lost, and not our houses.

QUEST: Billy Bragg, when this has all been resolved, please come back and talk more about this and help us understand what happened. Thank you very much.

BRAGG: Thank you very much.

QUEST: That is the singer, Billy Bragg, talking to me at the (inaudible).

To Port Au Prince now where Anderson Cooper joins me. Anderson is under-seeing the details of a rescue attempt. Anderson, we're -- we're many days into this after the -- the -- the actual earthquake. So -- so what's going on?

COOPER: (Inaudible)...

QUEST: Anderson Cooper -- Anderson Cooper, can you hear me? It's Richard Quest. Anderson Cooper -- let's try one more time. Can you hear me? We seem to be having some communication problems with Anderson which of course is entirely understandable. We do have a connection there.

Is it worth trying one more time to see if Anderson can hear me? Anderson, are you there?

COOPER: Yes, I am.

QUEST: Oh, well there we are. My...

(CROSSTALK)

COOPER: Richard (inaudible)...

(CROSSTALK)

QUEST: Yes, go ahead please, Anderson. Go ahead.

(CROSSTALK)

COOPER: Yes, at the general hospital, a little boy has just brought - - been brought in, who's been found in the rubble alive which is just extraordinary that this is eight days since the earthquake. We were here when his uncle brought him in.

The little boy is covered in dirt and dust. But amazingly he -- he -- he was found in a void (ph) space not by a professional search and rescue team. His uncle says that he was just searching through the rubble with several of his friends with a pick ax and a flashlight. And they -- they came upon the -- the little boy -- his nephew. His parents are dead presumably in the same site.

The little boy is now being cared for by doctors from the International Medical Corps. Two American doctors are there to -- actually two registered nurses are there. And I -- well I've just been with this little boy. He's -- he's talking. He's -- he's saying he's thirsty, and - - and wants some water.

They gave him his first sips of water, but they can't give him too much water at this point. He's severely dehydrated. They -- they've tested out his skin. It doesn't -- it's very brittle. It doesn't bounce back, which is a sign of severe dehydration. They've obviously put I.V.s in him.

He also has that Kartsochekov (ph) Syndrome which is I guess what happens after several days. Your -- I mean basically your body starts eating itself, the muscles and the fat, in order to survive. And nurses say it's a distinctive smell and that he actually has that (ph). But otherwise he's in good shape. And they -- they're frankly just stunned and -- someone can be alive after so long. This little five year old boy. His name is -- is -- is it Hasmanly Elisay (ph).

QUEST: Extraordinary and -- and heart warming, and -- and I mean, Anderson, is it -- when there are more of these cases is it reinforcing the idea that the -- the rescue effort should continue longer? Because the debate is now very much at what point rescue just becomes recovery.

COOPER: It certainly is the (inaudible) and I -- I don't know the answer (inaudible). You know, I -- I can tell you there are still many search and rescue teams out there today. I've been driving around Port Au Prince all day as we do every day. We've come across a number of teams. You know they are committed to continuing the search until -- until they're told that the time has passed.

As -- you know, yesterday we thought it was incredible that an elderly lady was pulled out of the rubble in the International Cathedral after seven days. And now this little boy who is -- you know, seems to be in much better shape than -- than that lady was. I -- I talked to -- you know I mean the nurses were -- were incredulous. And you know, said, "Well, look, you know it -- it helps to be young."

I mean that if you're young, if you're in a place that has ventilation, you know, it -- it adds to your chances. And three days may be the average to go without water. But you know the -- the -- the uncle of this boy said that he -- that he didn't think he had any food or any water. Access to any. When the uncle found him he was curled up in a little ball on the floor. But it's just extraordinary.

QUEST: Anderson I -- I -- now I need to let you go to carry on with your news gathering juices. But -- but just -- I just want to dwell for one second if we may, Anderson, on this mood of -- the -- that generates when something like this happens in a sea of absolute despair and devastation. Once again just take -- take us into that hospital when the boy arrived. Give us a little feeling of what...

COOPER: Yes, I mean, the scene outside the hospital is one of -- I don't want to say chaos, because there is some order to it, or at least an attempt to restore order. But there are hundreds of people lined up outside this hospital. It's a general hospital in downtown Port Au Prince. Hundreds of people who have various ailments.

They have to -- there are now U.S. troops manning the perimeter of the hospital allowing people in and out. And so only the -- really the sickest people get inside the hospital. The -- because of the aftershock hit this morning -- 6.1 aftershock, the -- the hospital had to be evacuated. So you now have all the patients -- you know -- looks like -- I would -- I'm estimating a hundred to 200 patients at least out in the courtyard in the open sun. So there's that drama to deal with.

So it is obviously a chaotic situation. You have Haitian American doctors here who have come down. More than a hundred of them, and -- and EMTs from New York.

QUEST: Right.

COOPER: Haitian American, you know the International Medical Corps. The entire medical team. The uncle came carrying this little boy. He got out of a vehicle, got through the crowd. Was allowed into the hospital. Like you look at this little boy, any -- anybody manning a gate is going to allow him through, Richard. Very clearly he looks, you know, severely -- he looks like you know one would anticipate somebody looking after being under the rubble.

QUEST: Right.

COOPER: He's covered in dust. He's covered in dirt. He's got a -- his eyes are -- are -- are hollow. He -- he's -- he's barely looking at you. He's barely able to keep his eyes open. But already he has started to be revived. They rushed him into this small little room. Two nurses immediately started working him. Started to give him I.V. fluids. He kept saying, "I'm thirsty. I'm thirsty."

Finally they -- they gave him just a little water to drink which he -- he gulped down. But they had to pull it way, because you -- you can't give somebody who's been without...

QUEST: So (inaudible)...

COOPER: ... too much.

QUEST: Anderson Cooper at the hospital. When there's more on that, please come back to us immediately. We'll take you straight to the program (ph) there is.

COOPER: Sure.

QUEST: Jonathon Mann (ph) is in Port Au Prince as well as part of our reporting and broadcasting team.

And Jonathon (ph), yesterday you and I had a -- had a -- for want of a better phrase, a robust discussion and -- or an analysis on the aid situation. So I start tonight by asking you very bluntly is more aid getting through?

MANN (PH): Well before you can get to that, Richard, let me just tell you about the aftershock. Because as Anderson was saying, people at that hospital were frightened. People all over the city were terrified by that. It came through reminding everyone of what this city endured eight days ago. And threatening the same thing all over again.

When it was over, we found out that in fact it was of a magnitude 6.1 rather than 7.0. And depending on how you do the math, that's either one 10th, one 20th or one 30th as bad. Enough to rattle the walls here. Send the entire building -- we were in trembling. Scared a lot of people all around the city who rushed out of the structures they were in. Or even if they were outside, rushed out of the way of anything they thought might fall on them.

That was what we all endured. As it turned out it ended quickly enough -- 15 -- 20 seconds later. A minute later even this building was stopping its movement. So that really put -- it sets a tone for I think the rest of the day. One more reminder of just how deeply Haiti is in all of this.

And when it comes to aid, not nearly enough is getting through. The efforts have been Herculean. A million meals delivered by the World Food Program. We have the U.S. creating new air fields. New ports for the country to try and keep -- keep all of the aid coming in. So not enough -- not nearly enough, but a lot more than before.

Richard?

QUEST: Jonathan Mann in Port-au-Prince and as I always say on these occasions Jonathan, come back the moment that there's more to tell us and we'll bring you straight onto the program.

This is QUEST MEANS BUSINESS. You're watching CNN. I'll be back in just a minute.

(COMMERCIAL BREAK)

QUEST: Good evening. I'm Richard Quest, QUEST MEANS BUSINESS, this is CNN. The euro has been tumbling against the U.S. dollar where it's currently sitting at its weakest level in five months. One euro buys around $1.40. In the second half of the last year, euros steadily gained strength and then it dropped back in recent weeks. You can see that (INAUDIBLE) we are enjoying (INAUDIBLE) all sorts of reasons. Is it Greece? It's a member of the euros (INAUDIBLE) its deficit. Is it investors are retreating to safety of the dollar when the economic signals turn ominous and this week, China's move (ph) was to slow down its economy. Also, is there a chance America's budget deficit might turn out to be lower with the Republicans hoping they can block health care reform.

Mark Ackroyd, senior currency analyst at Corporate FX. Now Mark let's talk currencies. What happened with the euro? What's the underlying real reason?

MARK ACKROYD, SENIOR CURRENCY ANALYST, CORPORATE FX: At the moment it's Greece (ph) certainly now is the big story. It's not only Greece, but it's certainly the main (INAUDIBLE) It's also the fact that you've got Spain, Portugal all with budget deficit issues.

QUEST: But what are they frightened of? For a currency to reverse its trend, there has to be a fear and what is the fear?

ACKROYD: I think this is a short-term thing. I don't think this is a reverse of the trend on a bigger scale. I think we'll see this story settle down over time. I think the short term this has got a bit further to go, but longer term I see euro dollar back up towards $1.50 again.

QUEST: So you're really saying that this is a plan (ph). It's not the trend or a fundamental shift.

ACKROYD: Absolutely. I think with currency (INAUDIBLE) you thought a battle (ph) of weaknesses, the euro is the one struggling the most because it's grabbing the headlines.

QUEST: That's a fascinating part (ph) of the moment. We'll talk about the way a currency is moving, but of course, a currency's movement is a strength and a weakness (INAUDIBLE) What we're seeing at the moment is really a weak dollar that just happens to be strong (ph).

ACKROYD: I think you're right, absolutely and you mentioned earlier the dollar is where people revert to in times of uncertainty. We've got uncertainty at the moment and it's obviously (ph) strengthening on the back of that. You've also got the weakness in the euro with Greece, the two factors, the contributions to euro dollar down $1.40 U.S.

QUEST: Is everyone in the market seriously thinking that Greece will default?

ACKROYD: No. I don't think they are and that's why I saw I think this is going to be reversed relatively quickly. I think uncertainty breeds weakness and that's why we've got that weakness in the euro, but the longer-term view is a move back up towards $1.50 where we were just before Christmas.

QUEST: With the UK's horrific budget deficit and unemployment, where are you forecasting pound/dollar, pound/euro for the rest of the year, because that's a key number.

ACKROYD: Pound/dollar I think we'll see this moving higher. I think we'll see...

QUEST: Well, the pound moving up.

ACKROYD: I think we see the pound strengthening against the dollar.

QUEST: On what basis?

ACKROYD: The (INAUDIBLE) which is what the dollar's trading off particularly, news from sterling (ph) in the UK not too bad at the moment. We had actually unemployment 4 to 7.8 percent. We saw CPR come out better than expected or higher than expected certainly which suggests that we may increase interest rates more than we thought.

QUEST: So at $1.57 to $1.60 at the moment, you're forecasting where for sterling by say mid to late year?

ACKROYD: I suggest something along the lines of $1.70. I fell that's where the market wants to go to.

QUEST: Really? And yet there are people who take exactly the opposite view and think it's going to down to $1.30, $1.20.

ACKROYD: Absolutely. I think there will be some short-term, some short-term weaknesses for sterling. (INAUDIBLE) sterling this political instability. We are the only GT10 country steeped (ph) in recession, but ultimately I think as we move towards the end of the year, we see it towards $1.70.

QUEST: How significant in your world at the moment is the UK election which will of course will possibly (ph) held by June and is likely to be, likely, likely on May 6th.

ACKROYD: Relatively significant. I think the view of the conservative victory is holding up sterling to a certain extent. If that were to reverse, I do think you might see (INAUDIBLE)

QUEST: (INAUDIBLE) apologize to you Mark. I'm (INAUDIBLE) you here on this.

ACKROYD: That's what I'm paid for.

QUEST: (INAUDIBLE) finally pound/euro.

ACKROYD: I think that we'll see this genuinely moving higher (INAUDIBLE) we'll see the pound strengthening against the euro. So I would say in six months, we're looking something like $1.18 to $1.20, $1.18 to $1.20 and that's (ph) huge, but I see that...

QUEST: It's better than $1.09, $1.08 (INAUDIBLE)

ACKROYD: It's a big more (INAUDIBLE) isn't it? Thank you very much.

QUEST: Thank you very much. (INAUDIBLE)

In a moment, we will come back with a clash of the tech giants which is brewing. It boils down to an iPhone app. How Apple will be coming back to fight Google. It's very complicated stuff (INAUDIBLE)

(COMMERCIAL BREAK)

QUEST: OK, the battle of the search engines is now about to take on a new role. We all know about it from the computers where it was, who has the primary search engine within your PC or laptop. Now the smart phone is going to be changing things. It would represent a major shake up in the tech sector. There are media reports that say Apple is in talks with Microsoft to ditch Google as the iPhone's default search engine. (INAUDIBLE) please do stay with me. It would replace it with Bing. Users would have to actively change their phone settings to search with Google. So what is competition between Google and Apple growing more intense, particularly in this smart phone market. Is it significant if Apple were to ditch Google? Nate Lanxon is an editor of the online technology magazine wired.uk. Is it significant?

NATE LANXON, EDITOR, WIRED.COM UK: It's hugely significant yeah, absolutely. The mobile web space is heating up massively now. It's gone from being websites especially built around tiny little screens to these phones using the full Internet. So to be the prominent search provider on something like this, the iPhone or other phones that are on the market at the moment, a huge -- you need to be number one.

QUEST: But why would Apple do it? Is it because Google is getting its own phone? It's got the Android operating system and basically because let's face it, Microsoft has got Windows mobile.

LANXON: They have. Well I mean there's two factors that are at play here I think. The first is as you mentioned, Google has its own Android operating system which runs on competing phones to the iPhone. So an Apple and Google have been getting seriously, the competition between the two companies has been rising over the last 12 months in particular. And I think the other fact that could be at play here is that Microsoft may be prepared to offer a pretty good deal to Apple because Microsoft knows how badly it needs to be a leader in the mobile search space as it does in the desktop world as well.

QUEST: This is bordering on perverse. Microsoft, which does battle with Apple on the PC/Mac market, which has done battle just like everything from Window, from media player to (INAUDIBLE) now saying it's promiscuous.

LANXON: It's kind of a symbiotic relationship in a way between the two companies. I mean Apple and Microsoft know that there are ways that they can help each other, even though they compete in most of the spaces.

QUEST: All right, but what was your reaction Nate when you heard about this story?

LANXON: I think that it could actually be a very good move for Apple. I think that if Microsoft is prepared to offer something better than Google, which it could well be. It knows how much it needs to be in this space, they could be offering something better.

QUEST: Does it matter in the sense that when we're all, I mean, we're all downloading apps, does it really matter. This isn't my phone, I have to say, so I'm not going to switch it on because who knows what we'll find out. But you could just download -- I mean even if you downloaded one app there would be another search app that you could easily download.

LANXON: Well this is different actually because the place that this is happening is inside the browser, the web browser. There is only one default browser on the phone. This is (INAUDIBLE)

QUEST: Well you could download another one.

LANXON: There are other applications that let you browse the web but they're all essentially being used through the same, little bits of software in the phone. What this is doing is it's saying you have to fire up this browser which is called Safari on the iPhone and the default search engine to use is Google.

QUEST: Right.

LANXON: So downloading another one...

QUEST: Downloading another search engine wouldn't work.

LANXON: Not necessarily, no. You could download an application that would let you search.

QUEST: Yes.

LANXON: That would take effort and a lot of people aren't prepared to put that effort in. They like to use the default settings. That's one of the reasons why Microsoft's Internet Explorer has been so popular over the last decade or so.

QUEST: I've got a headache starting. I'm over 40 and I'm starting to wonder, does it matter?

LANXON: It does matter. Whether or not it matters to you or not, that is a big question.

QUEST: You're going to be coming back a lot more I hope and talking about technology with us.

LANXON: Hope so.

QUEST: And explaining these things and trying to guide me to this thicket or forest.

LANXON: It's a very exciting forest though.

QUEST: Is it?

LANXON: Very exciting, absolutely, very exciting for us, some very exciting trees.

QUEST: It's winter. There's no leaves on them.

LANXON: (INAUDIBLE)

QUEST: But you're going to (INAUDIBLE)

All right, let's turn our attention to another forecast (ph). Guillermo Arduino is at the world weather center for us this evening and Guillermo that talk of snow over the large part of Europe, some of it materialized. I'm not doing your job for you, but not as much as we figured (ph).

(WEATHER REPORT)

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QUEST: At the world future energy summit, Middle Eastern leaders and thinkers are planning for a time when oil is running out. The summit is in Abu Dhabi and about how we meet our future energy needs. Leone Lakhani went in search of the alternatives.

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LEONE LAKHANI, CNN CORRESPONDENT (voice-over): If the nations blessed with rich oil reserves, but the United Arab Emirates is the latest Middle East country to explore nuclear energy.

(on-camera): The government here says the demand for electricity will double for 2020 and the current capacity won't meet that demand. So they say there's a critical need for alternative means of energy. The question is, in a country that's so full of sunshine, why opt for nuclear energy instead of solar power for instance?

Building a solar plant may seem more economical, but the company in charge of overseas the UAE's nuclear program says the energy generated won't meet electricity demands.

MOHAMED AL HAMMADI, CEO, EMIRATES NUCLEAR ENERGY CORPORATION: When you look at the electricity, you have base load (ph) generation and also (INAUDIBLE) generations. The solar and the wind (INAUDIBLE) supplies (INAUDIBLE) daytime when you have wind and we don't have wind. But when you talk about nuclear, that's a (INAUDIBLE) that (INAUDIBLE) electricity and that's what make it more attractive.

LAKHANI: The UAE's nuclear energy program will be used for domestic consumption. It's not the only country in the region with those ambitions. Egypt's announced plans to build a number of nuclear power stations to generate electricity. Saudi Arabia is developing a civilian nuclear power supply with Bahrain, Kuwait, Oman and Qatar. Jordan plans to develop its first nuclear power plant by 2017. It also boasts (ph) large reserves of a uranium blend and could potentially create an industry for exportable nuclear materials.

RICHARD STEWART, NYU LAW SCHOOL: There's going to be a need for uranium for expanding nuclear power and Jordan is a very good source of it. The enrichment is the key security concern in the process, not the mining, not the plants.

LAKHANI: Any nuclear energy program in the Middle East may still come under scrutiny, but it's a concern the UAE is eager to deflect.

AL HAMMADI: (INAUDIBLE) and it is the most important aspect of this program. When it comes to (INAUDIBLE) program that (INAUDIBLE)

LAKHANI: Safety, security and renewable energy, the goal for a region that so much of the world depends on for their energy needs is now key to diversify away from their traditional forms of energy. Leone Lakhani, CNN, Abu Dhabi.

(END VIDEOTAPE)

QUEST: Now of course oil hovering around the 70s per barrel and still being one of the major factors that will of course be an interesting aspect in the weeks ahead. Leone Lakhani there reporting from Abu Dhabi.

The markets around the globe have been very concerned by what they've been seeing of course in the U.S. earnings season. Now rather (INAUDIBLE) for you but the Dow Jones down tonight is off 136 points, one of the largest losses of the year so far. That's not necessarily something that we need to get terribly excited about since the year is barely three weeks old, off 1.2 percent. The reason now of course is a variety, but with that, we've had numbers from Morgan Stanley, which were not good. We've had numbers from IBM which has taken the market down, from American Airlines, AMR. We've also had losses from Bank of America. The U.S. earnings season is now starting to create some real worries about the strength of course. Factor in of course China and its tightening of the liquidity. China says it's not. It's just doing a bit of mopping up, but that of course is one of the reasons we are seeing these results.

How did that play in the euro, where the euro of course is, they dropped sharply after signs that the Chinese government was applying that brake to the economy. Look at the numbers. Mines and resources led the declines. That's entirely understandable. China with its vast requirement of mines extracts a lot more than 6 percent, Rio Tinto shed 4 percent. Car makers were down (INAUDIBLE) 2 1/2, UBS downgraded the stock (INAUDIBLE) unemployment numbers in the UK as well.

So that is the scenario and just to remind you our Q25 is both here and tomorrow and Friday. We're at (INAUDIBLE) at the moment. This is QUEST MEANS BUSINESS. When I return in just a moment, I'll have a profitable moment and it's all about paying taxes.

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QUEST: Tonight's profitable moment, Billy Bragg (ph) who you heard on this program tonight, his refusal to pay taxes until the British chancellor of the exchequer forbids RBS from paying high bonus is a marvelous piece of political theater.

The government says it will prevent excessive payments, but you know and I know excessive is in the eye of the beholder. No doubt, Mr. Bragg and her majesty's revenue and customers are heading for a head to head battle. Clearly, we can't pick and choose which taxes we are going to agree with and we're going to pay. That's a road to anarchy, the sort of anarchy that Billy Bragg sang about in the 1980s. This really all comes down to something must be done, a stand needs to be taken and Billy Bragg says he's the one who's going to do it.

Well, Billy Bragg should do. He knows a thing or two. He released an album many years ago called "Talking with the Tax Man About Poetry." Now of course he's going to be talking to the tax man about not getting locked up.

And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest. Whatever you're up to in the hours ahead, I hope it's profitable. Christiane Amanpour is after the headlines from the I-desk.

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